On September 28, 2018 in Hanoi, Deputy Prime Minister Vuong Dinh Hue - Chairman of the National Financial and Monetary Policy Advisory Council, chaired a meeting to review the monetary policy carried out in the third quarter of 2018 and to outline the tasks for the coming time. Attending the meeting and representing the banking sector were Governor Le Minh Hung of the State Bank of Vietnam (SBV), Deputy Governors Dao Minh Tu and Nguyen Thi Hong.
At the meeting, the Council members agreed with the macroeconomic assessment over the past years, in particular the macro-economy in 2018 has been remained stable in line with the Government's Resolution No. 01 in the context of escalating geopolitical instabilities and the world trade turbulences, Fed’s interest rates raised... It was reflected in the steady increase of the GDP growth in these past few years, especially in the first nine months of this year, Vietnam’s GDP grew at 6.98%, the highest GDP growth rate since 2011 and higher than the set-out target. The inflation was controlled at a level lower than the National Assembly's target.
Reporting on the Monetary Policy Management, SBV Governor Le Minh Hung emphasized: “Following the direction of the Government, the SBV has successfully maintained stable interest rates, stabilized the liquidity, stabilized the exchange rates, and maintained the macro fundamentals… The process of restructuring, resolving bad debts of the credit institution (CI) system has been implemented intensively, the foundation of the system has been improved remarkably, and the rate of resolving bad debts in the CIs has been very good. After only one year of implementing the National Assembly's Resolution No. 42, the SBV has drastically directed the relevant parties to reduce considerably the quantity of bad debts and the contingent liabilities of the system.”
In order to further promote the restructuring of the CIs, the Governor mentioned the financial capabilities of the CIs in the restructuring process. The Governor shared that the Government is considering to increase the financial capabilities of the CIs, subject to the assurances that the CIs are able to control the growth rates of their total risk-weighted assets.
Assessing the monetary policy management, Deputy Prime Minister Vuong Dinh Hue complimented the SBV for its policy management, which has been very proactive and flexible, especially in terms of stabilizing the exchange rates, the interest rates and export credits. In the context of escalating US-China trade conflict, many countries tend to raise their interest rates, the interest rates in Vietnam have been managed at a stable level. The exchange rates have experienced certain pressures, but the SBV has timely adjusted the central rate in a flexible manner, regulated appropriately the liquidity and the interest rates of the VND, and enhanced the information and communication. Hence the market liquidity has been guaranteed, the transactions in foreign currencies have been going on smoothly.
In addition, the SBV has closely coordinated with other macroeconomic policies including the fiscal policy to stabilize and develop the monetary market, the Government bond market, reduce the cost of borrowing for the State budget...
The Council members also mentioned that the monetary policy and national finance management have to face many challenges due to the large openness of the economy, the impacts of the unfavorable developments of the world economy; the exchange rates and the interest rates have many unpredictable factors as trade wars escalate; the operations of the private sector still face many difficulties;…
In the coming time, the Council members suggested that the Government closely monitor the evolution of the global trade conflicts, the fuel prices, etc. in order to take timely measures to mitigate any negative impacts; be persistent with the flexible management of the monetary policy and the tightening of the fiscal policy; taking advantage of the macroeconomic stability with a view to further restructuring the economy, renovating the growth model on the basis of a sharp increase in labor productivity.
The Deputy Prime Minister said that the performance of the price indices in the remaining months of the year has the advantage that it is going on the right track of the expected scenario; the core inflation has been low, the exchange rate pressures are cooling down; the money supply as well as credits have been carefully managed in line with the objective of supporting growth; the pressures on adjusting the prices of some commodities managed by the State from now until the end of the year are not very big… However, there are also factors that must continue to be monitored and updated, especially the world prices, particularly oil prices "standing" at a high level, the weather conditions evolving complicatedly, which requires continued efforts, not to allow expected inflation to occur. The target for keeping the inflation in 2018 is in the range between 3.7% - 3.95%.
Regarding the monetary policy management, the Council also recommended the Government and the SBV continue to maintain the interest rate levels at what have been recently, seeking to reduce the interest rates for the priority sectors; continue with the flexible management of the exchange rates; manage the core inflation in the range between 1.5 - 1.6%; continue to strengthen the restructuring of the CIs, increasing the resilience of this system, with due considerations given to the proposed increase of the capital of the commercial banks.
VA